Two individuals i {1, 2} get utility from the consumption of a private good x;...
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Two individuals i € {1, 2} get utility from the consumption of a private good x; and a public good G. The utility functions are given by u(x₁, G) = ln(x;) + ln (G). The two individuals have an income of m; = 1 and can spend the income on the consumption of the private good and the private provision of the public good: m; = = xi + gi. The total amount of the public good is given by G 91 +92. = (a) Determine all Pareto-efficient allocations and explain the underlying rule. (15 points) (b) Determine the equilibrium of public good provision that will arise when both individuals decide individually (non-cooperatively) how much of the public good to provide. Is this allocation efficient? (15 points) Two individuals i € {1, 2} get utility from the consumption of a private good x; and a public good G. The utility functions are given by u(x₁, G) = ln(x;) + ln (G). The two individuals have an income of m; = 1 and can spend the income on the consumption of the private good and the private provision of the public good: m; = = xi + gi. The total amount of the public good is given by G 91 +92. = (a) Determine all Pareto-efficient allocations and explain the underlying rule. (15 points) (b) Determine the equilibrium of public good provision that will arise when both individuals decide individually (non-cooperatively) how much of the public good to provide. Is this allocation efficient? (15 points)
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a A Paretoefficient allocation is an allocation in which it is not possible to improve the utility o... View the full answer
Related Book For
Financial accounting
ISBN: 978-0136108863
8th Edition
Authors: Walter T. Harrison, Charles T. Horngren, William Bill Thomas
Posted Date:
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